What To Do If You’re Struggling To Repay A Business Loan?

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Running a business in Australia comes with its challenges, and sometimes, unforeseen financial difficulties can arise, leaving you struggling to meet loan repayments.

If you’re struggling with your business loan repayments, you’re not alone, and there are concrete steps you can take to address the situation.

Understanding The Importance Of Early Action

When facing difficulties with loan repayments, time is your most valuable asset. The sooner you recognise and address potential repayment issues, the more options you’ll have.

Many business owners in Melbourne and across Australia have successfully navigated loan repayment challenges by taking prompt action. Working with a business loan broker in Melbourne can provide valuable guidance during these critical early stages.

Contact Your Lender

Reach out to your lender immediately and explain your situation. Banks and financial institutions often have dedicated hardship teams to assist borrowers facing difficulties.

Potential assistance can include:

  • Deferring loan repayments
  • Waiving fees and charges
  • Consolidating debts
  • Deferring credit card payments

Even if full repayment isn’t possible, try to make partial payments. Consistent partial payments signal to your lender that you’re committed to resolving the issue, which can reduce the likelihood of legal actions.

How To Request Hardship Assistance?

Writing your request can be beneficial when seeking hardship assistance. Templates are available to help format your application, making it straightforward and professional.

Here are some critical points to include:

  • Clearly outline your situation.
  • Request the lender not to list a default on your credit report.
  • Inquire how your repayment history information will be reported.

Remember, applying for hardship assistance does not negatively impact your credit score. However, it’s crucial to confirm your lender’s reporting practices.

Prepare For Rejection

If your hardship request is denied, it’s essential to document your interactions and prepare for the next steps. Keep records of all communication with your lender, including emails, letters, and phone call details. 

This documentation will be vital when escalating your issue to the Australian Financial Complaints Authority (AFCA). Ensure you also prepare financial documents like cash flow statements or business budgets to support your case.

Involving The Australian Financial Complaints Authority (AFCA)

If your hardship request is denied, the Australian Financial Complaints Authority (AFCA) can mediate. They handle complaints from small businesses with loans under $5 million. Their contact number is 1800 931 678, and they can assist in finding a resolution with your lender.

Impact On Credit Rating

A successful hardship variation application won’t directly affect your credit rating.

However, it’s crucial to request that your lender:

  • Refrains from listing defaults
  • Doesn’t report payments as overdue
  • Clearly communicates their intended reporting approach

Benefits Of Making Partial Payments

Partial payments can significantly benefit both you and your lender. Here’s why:

  • Reduces Penalties: Even small repayments can reduce late fees or penalties.
  • Demonstrates Commitment: Shows your lender you’re actively working to resolve the issue.
  • Lowers Interest Accrual: Keeps the overall debt from growing faster than it needs to.

Seek Professional Guidance

Before considering additional debt to address urgent financial needs, consult experts such as:

  • Financial advisors
  • Business advisors
  • Financial counsellors

High fees, interest rates, and security arrangements can worsen your financial position if not carefully assessed.

Financial counsellors provide free support to individuals and businesses. If you operate in rural areas, rural financial counsellors are available to assist primary producers and small businesses.

Also Read – A Guide to Choosing the Right Business Loan

Government Assistance And Recovery Packages

Federal and state governments offer support programs for businesses affected by challenges like bushfires, floods, and droughts.

These packages often include:

Support Type

Details

Grants

Financial aid for eligible businesses

Concessional Loans

Low-interest loans to ease financial strain

Tax Deferrals

Extensions for taxation commitments

Ensure you check eligibility criteria to access these resources effectively.

Free Business Advice

For businesses in New South Wales, the Business Connect program offers free, professional advice. 

This service can help you:

  • Manage cash flow
  • Develop financial recovery plans
  • Access financial support schemes

Their experts provide tailored strategies for short-term and long-term recovery

Dealing With Service Providers

If you’re facing financial difficulties, contact your utility providers for assistance. Many offer financial hardship programs for telecommunications, energy, and water bills. 

If unresolved, escalate the issue to relevant authorities:

  • Energy and Water Ombudsman NSW
  • Telecommunications Industry Ombudsman

Addressing Insurance Claims

If your financial hardship is tied to natural disasters or business continuity, review your insurance claims. Should your claim be denied, appeal with the insurance company or seek external review through AFCA.

How Start-Up Business Loan Broker Melbourne Services Can Help?

Handling financial challenges can be difficult. Reaching out to a business loan broker in Melbourne or consulting with mortgage brokers in Melbourne can provide you with tailored advice and loan restructuring options. These experts understand local business landscapes and can guide you through securing better terms or refinancing options.

Take Control Of Your Business Loan Challenges Today

If you’re finding it hard to repay your business loan, don’t wait until it’s too late. At LTE Loans, our experienced business finance brokers in Melbourne are here to guide you through tailored solutions that suit your financial needs. From refinancing options to unsecured loans, we’ll work tirelessly to secure the right outcome for you. Let us help you regain control and set your business back on track. 

Contact our team today to explore your options and experience the difference of working with Melbourne’s best business finance brokers!